The Basics of Good Purchasing Contracts

February 1st, 2017

If you are a professional purchasing agent,
you know what you need and how to get it.
You may be a great educator but that doesn’t
necessarily mean that you are good in business,
which can create problems.

What goes into creating a good RFP? Avoid
vague language, outrageous budgets and impossible
timelines. How can your school avoid
these pitfalls and make the paper pushing and
number crunching a bit easier?

First, don’t create inconsistent RFPs
fraught with errors. Considering the amount
of hours companies put into responding to
RFPs, it only seems fair to put out a clear,
consistent document.

When putting out a RFP for furnishings,
the more specific the better. Materials, design
specs, colors, quantities, warranties, delivery
dates and installation need to be included.
These factors affect the price, so the more
information you provide, the better and more
accurate the quote will be.

To be as clear as possible, the best RFPs
include a brief description of specifications and a
few manufacturers’ model numbers of products
that fit the job’s needs. This lets companies know
exactly what you are looking for and levels the
bidding field. While it is great for a manufacturer
to be named in the RFP, it doesn’t mean that said
company will automatically get the business.

How does a school determne the quaity of
products? Don’t rely on a picture in the catalog,
ask the manufacturers or distributors to supply
samples so you can compare products side by side.

Penalty clauses represent an expected part
of any contract. When laying them out, it’s best
to think each detail through. For instances,
sometimes furniture will come early. This could
be a problem if the goods are for a facility that
isn’t built yet. Not every school has a place to
store a truckload of desks.

Early delivery is just one example of
non-performance that might be covered by a
penalty clause. Schools can take a flat fee or
percentages from the budget to cover these
problems. The penalty must be high enough for
the bidder to take it seriously.

Hammering out penalty clauses, warranties
and liability often sets off a dance knows as
the “battle of the forms.” This is where vendor
terms conflict with purchasing terms and each
is trying to incorporate their conditions by
being the last form sent. This “last shot rule” is
generally accepted in courts. It is best to take a
proactive stance by making terms readily available
and by pre-signing agreements.

Budget, of course, remains a compelling
factor in any RFP or contract. Multiyear deals,
however, don’t always have a clear bottom
time, and asking for a fixed price over a span
of time can create conflict becasue costs go up
and down over time.

Allowing a price escalator that is tied to a
nationally published price index is one fair option.
The best contract develops relationships
beneficial to both parties.

Those relationships often grow into
better deals down the line. Many states allow
schools to award contracts to multiple manufacturers.
It is known as a “hunting license” in the trade because it lets schools pick the
cheapest deal, but it doesn’t always foster
good business relationships.

Remember, price does not represent the
bottom line in awarding contracts. The lowest
bid is not always the right choice. You need to
purchase the right product, delivered at the
right time in the right quality.

This article originally appeared in the February 2017 issue of School Planning & Management.